PRE- AND POST-GRANT PATENT STRATEGIES
Intellectual property spurs innovation by raising the rewards for the discovery of novel and non-obvious inventions that boost the economy and employment, by the government grant of a limited time monopoly to the inventor for the discovery.
IntroductionIntellectual property spurs innovation by raising the rewards for the discovery of novel and non-obvious inventions that boost the economy and employment, by the government grant of a limited time monopoly to the inventor for the discovery. However, the patent monopoly induced spurt in research and development must outweigh the loss from the monopoly. Otherwise, the monopoly becomes detrimentally resulting in the loss of consumer welfare and the high cost of healthcare [i].
After many years of steady increases, the number of patent infringement cases filed dropped for the second year in a row in 2016. The ten most active industry classifications (out of 20) collectively account for almost 90% of identified decisions. Patent cases associated with the consumer products industry were the most prevalent cases, relating to products such as diapers, infant carriers, cosmetic palettes, coffee cartridges, etc. (see figure above) [ii].
The median cost of a patent infringement litigation involving more than $25 million at risk ranged from $ 4.5 million in 2005 to $ 5.5 million in 2013[iii]. In an attempt to curtail the runaway litigation costs and to improve the quality of the patents, Congress has passed the America Invents Act in 2011 introducing several pre- and post-grant proceedings, which became effective in 2013. Since then, the median litigation costs have slightly dropped from $ 5.5 million in 2013 to $ 5.0 million in 2015, although this slight reduction may not be related to the AIA implementation.
Pre- and Post-Grant Proceedings available to improve the overall patent quality include:Pre-Issuance 3rd Party Submission (3PS)
? Ex Parte Reexamination (EPR)
? Inter Partes Review (IPR)
? Post Grant Review (PGR)
? Transitional Program for Covered Business Method Patents (TPCBM or CBM)
? Derivation Proceeding (DER)
Potential Advantages of Pre- and Post-Grant ProceedingsIn addition to the unnecessarily high costs of infringement litigation, low-quality patents have negative consequences such as high cost of the patent application process, entry avoidance of innovators, slower pace of innovation, deterrence of commercialization of new technologies and alternatives to incumbent technologies, and negative effect on consumer welfare [iv]. These negative impacts on welfare due to low-quality patents including NPE activity and ever-greening, make limitations on the legal protection conferred by intellectual property rights necessary [v].
Long before America Invented its Act (AIA) and instituted the Pre-Grant 3rd Party Submission (3PS), provisions for such submissions were already well established in the PCT, Europe, and in several countries like India, New Zealand, Australia, Peru etc., to assist the patent office in granting valid and high quality patents. Due to its centralized nature, the PCT 3rd Party Observations (3PO) may afford a single shot to provide quality control of patents granted at the national stage prosecution, through the PCT International Search Report (ISR) and Written Opinion of the ISA (WOISA) effective in all the designated states, without any extra effort.
Potential Advantages of Pre- and Post-Grant Proceedings:Additional advantage of PCT 3PO [vi]1) PCT 3PO allows third parties to make observations through ePCT public services referring to the prior art which they believe to be relevant to the question of whether the invention claimed in the international application is novel and/or involves an inventive step, which is prohibited in the US.
2) There is no fee for this service, which is limited to one submission of up to a maximum of 10 references, which costs $ 180 in the US.
3) 3POs may be submitted at any time after the date of publication of the international application and before the expiration of 28 months from the priority date, provided that the application is not withdrawn or considered withdrawn, whereas, in the US, no 3PS is not allowed after later of the 6 months after publication or issue of first office action.
4) The third party may choose to remain anonymous without hiring a surrogate.
In the US, the 3PS offers, not-free, but an inexpensive mechanism for bringing pertinent prior art to the attention of the USPTO so that valid patents are granted. The 3PS, also known as pre-issuance/pre-grant submissions, anonymous submissions, and third party observations, may actually strengthen the patent, as it is harder to invalidate a patent where the USPTO has considered the prior art submitted resulting in amended claims. In addition, the 3PS is free if the submission contains three or less reference. Therefore, through effective use of this process, it is possible to limit the patent scope or rejection of all claims of a competitor's pending patent application by introducing prior art with clear and concise relevance to each and every claim. For example, 3PSs in the 12/829,968 application resulted in its abandonment, while in the 13/460,635 application resulted in the cancellation of one claim and allowance of one method claim. Another interesting example is 13/493,787, a TrackOne application, in which the examiner rejected all claims on the grounds of nonstatutory obviousness-type double patenting, requiring terminal disclaimers for allowance. However, the 3PS filed later forced the claim amendments substantially narrowing of the claims. For more vist: https://www.avvo.com/legal-guides/ugc/anonymous-third-party-submission
Potential Advantages of Post-Grant ProceedingsPost-Grant Proceedings may provide cost and time savings, as evidenced by the increase in the number of Ex Parte Reexamination (EPR) filings from 272 in 2002 to 787 in 2012[vii]. Of the total 13217 EPR requests (out of which, 9217 or 70% were third party requests and 167 were by order of Commissioner) filed since start of the EPR on 17/01/1981 to 30/09/2014, 11402 (92%) requests were granted, 10698 certificates were issued, of which 2303 (22%) certificates were with all claims confirmed, 8395 (78%) certificates were with all claims canceled (12%) and with claims changed (7094, 66%).
The number of Inter Partes Reexam (IP Reexam) filings from 4 in 2002 to 530 in 2012, and by the 78% to 93% of certificates issued with cancellation or amendment of claims, and the reduction in median litigation costs (may not be related to AIA Pre- and Post-Grant Proceedings). Of the total 1919 IP Reexam requests filed from 11/29/99 to 9/16/2012, 1872 were granted, and 964 certificates were issued, of which only 7% of the certificates confirmed all claims confirmed, while remaining 93% were issued with either all claims canceled or with claim amendments[viii].
Under the America Invents Act[ix], in addition to the above EPR, a third party can challenge a patent's validity using Inter Partes Review (IPR) in place of IP Reexam, Post Grant Review (PGR), Transitional Program for Covered Business Method Patents (TPCBM), or Derivation Proceeding (DER). As the IP Reexam was replaced by IPR in 2012, the number of IPR petitions filed against NPE patents increased naturally, from 262 in 2013 to 758 in 2014, along with the number of covered business method (CBM) petitions filed against NPE patents from 48 in 2013 to 88 in 2014[x].
These results illustrate the success and effectiveness of Post-Grant Proceedings. However, preparation of a request for one of the Post-Grant Proceedings is not cheap, e.g., a request for the IPR costs about $278,000 and reaches more than $500,000 to obtain the final written decision[xi]. Non-practicing entity (NPE) activity for operating companies is the legal cost of defending against NPE suits, costing between $100 thousand and $1 million to resolve, with the median resolution cost of $482,000 and the mean resolution cost of $5.6 million [xii].
Pre-Grant 3rd Party Submission (3PS)The 3PS offers an inexpensive mechanism for bringing pertinent prior art to the attention of the USPTO so that valid patents are granted. The 3PS may actually strengthen the patent. Courts have repeatedly stated that it is harder to invalidate a patent where the USPTO has considered the allegedly invalidating prior art. Consequently, third parties should carefully consider the pros and cons before making a pre-grant submission.
The 3PS may be filed in any pending application before the later of (a) six months after the publication of the patent application, or (b) the date of the first rejection of any claim. The 3PS may be filed anonymously and electronically including 1) list identifying the items being submitted; 2) a concise description of the relevance of each item listed; 3) a legible copy of each non-US patent document listed; 4) an English language translation of any non-English language item listed; 5) a statement by the submitting party that the submission complies with the applicable statute and USPTO rule, that the submitting party does not have a duty of disclosure for the application; and 6) the required fee for more than 3 references. There is no fee if the submission includes three documents or less and it is the first submission by the third party. The examiner is required to consider compliant pre-grant submissions in preparation of the next official action. The submitted documents will be listed on the face of any patent that may mature from the patent application, indicating that the USPTO has considered them.
The 3PS may be useful in limiting the scope of a patent, as the patent applicant may narrow the scope of the claims in view of the printed publications, or may make statements on the record surrendering subject matter, resulting in a stronger patent in view of the prosecution history reflecting that the examiner considered the submitted documents. Invalidity based on the submitted publications may be more difficult to prove at trial than would have been the case if the USPTO had never considered the publications. The 3PS may be useful in defining claim terms and clarifying the overall scope of the patent. Thus, the 3PS helps the USPTO in improving the quality of the patent prosecution and patents.
Ex Parte Reexamination (EPR)[xiii]A patent owner, any third party, or the director of the USPTO may file theEPR request for reexamination of any claim of a patent. The patent owner may strategically use the EPR to bolster a patent or clarify any ambiguous claims. A third party (anonymously or openly) may file an EPR request, but may not participate during the examination process. The EPR is useful to minimize possible patent litigation costs and to have a final determination regardless of the outcome. If the requester is a third party, the EPR may lead to an unfavorable outcome with at least 22% resulting in certificates with claims confirmed and with favorable outcome at least 78% resulting in certificates with claims canceled or amended (see above).
A request for the EPR must include the following parts:
(1) A statement pointing out each substantial new question of patentability based on prior patents and printed publications;
(2) An identification of every claim for which reexamination is requested, and a detailed explanation of the pertinency and manner of applying the cited prior art to every claim for which reexamination is requested. For each statement of the patent owner and accompanying information submitted pursuant to ? 1.501(a)(2) which is relied upon in the detailed explanation, the request must explain how that statement is being used to determine the proper meaning of a patent claim in connection with the prior art applied to that claim and how each relevant claim is being interpreted. If appropriate the party requesting reexamination may also point out how claims distinguish over cited prior art;
(3) A copy of every patent or printed publication relied upon or referred to in paragraph (b)(1) and (2) of this section accompanied by an English language translation of all the necessary and pertinent parts of any non-English language patent or printed publication;
(4) A copy of the entire patent including the front face, drawings, and specification/claims (in double column format) for which reexamination is requested, and a copy of any disclaimer, certificate of correction, or reexamination certificate issued in the patent. All copies must have each page plainly written on only one side of a sheet of paper;
(5) If by a third party requester, a certification that a copy of the request filed by a person other than the patent owner has been served in its entirety on the patent owner at the address as provided for in ? 1.33(c). The name and address of the party served must be indicated. If service was not possible, a duplicate copy must be supplied to the Office along with an explanation; and
(6) A certification by the requester that the statutory estoppel provisions of 35 USC 315(e)(1) or 35 USC 325(e)(1) do not prohibit the requester from filing the EPR request.
Inter Partes Review (IPR)The IPR may be requested by a third party, but that party must identify itself as a real party in interest and set forth the pertinency and manner of applying the cited prior art to every claim for which the review is requested. The IPR is available for any unexpired patent that has been issued for more than nine months and is not undergoing the PGR. The standard for initiating the IPR, i.e., that there is a "reasonable likelihood that at least one of the claims challenged in the petition is unpatentable," is more stringent than the standard for granting the EPR request. The IPR has the 50/50 chance of at least one of the claims invalidated [xiv]. In the IPR, the third party requester may submit declarations of supporting evidence and opinions, and additionally has a right to an oral hearing. Limited discovery is available regarding evidence "directly related to factual assertions advanced by either party." Both parties will also have the opportunity to appeal any adverse final decision. Although limited to challenges based on novelty and obviousness over patents and printed publications previously not considered, the IPR is a highly valuable alternative to expensive litigation.
Post Grant Review (PGR)A third party may use the PGR request to challenge a patent having at least one claim with an effective filing date March 16, 2013, within nine months after the issue date of the patent or the reissue certificate. If the petitioner has already been sued for infringement of the patent, the PGR petition must be filed no later than one year after the petitioner was sued. The PGR request may be based on any grounds that may be raised under 35 USC 282(b)(2) or (3), such as utility under 35 USC 101, novelty under 35 USC 102, obviousness under 35 USC 103, and enablement, written description and definiteness under 35 USC 112.
Limited motion-based discovery is available to the parties to the PGR. Unless the patent owner and petitioner agree to one of the mandatory discovery provisions under 37 CFR ? 42.51, all other discovery by the patent owner and petitioner must be requested by motion, which requires a showing of good cause as to why the discovery is needed. The petitioner is required to produce any exhibits, and any affiants, declarants or experts whose testimony was referenced in the petition for cross-examination. Each party is also required to provide any relevant information that is inconsistent with a position it advances during the proceeding concurrently with the filing of the documents or things that contain the inconsistency.
Transitional Program for Covered Business Method Patents (TPCBM)
The TPCBM is a trial proceeding conducted at the Board to review the patentability of one or more claims of a covered business method patent. The TPCBM proceedings employ the standards and procedures of the PGR, with certain exceptions. For example, for first to invent patents only a subset of prior art is available to support the petition. Further, a person may not file a petition for the TPCBM proceeding unless the person or the person's real party in interest or privy has been sued for infringement of the patent or charged with infringement under the patent. The procedure for conducting the TPCBM review took effect on September 16, 2012. The program will sunset for new TPCBM petitions on September 16, 2020[xv].
Derivation Proceeding (DER)The DER proceeding requires that an applicant for patent file a petition to institute the proceeding. The petition must set forth with particularity the basis for finding that an inventor named in an earlier application derived the claimed invention from the petitioner. The petition must be made under oath and supported by substantial evidence. The petition must be filed within 1 year of the date of the first publication of a claim to an invention that is the same or substantially the same as the earlier application's claim to the invention. In a petition for a derivation proceeding, the petitioner must (i) identify which application or patent is disputed; and (ii) provide at least one affidavit addressing communication of the derived invention and the lack of authorization for filing the earlier application.
Submission of IPR, PGR, TPCBM, and DERWhile the United States Patent and Trademark Office (USPTO) processes the Ex Parte Reexamination (EPR) Request, the Patent Trial and Appeal Board (PTAB) conducts trials, including Inter Partes Review (IPR), Post Grant Review (PGR), Transitional Program for Covered Business Method Patents (TPCBM), and Derivation Proceeding (DER), hears appeals from adverse examiner decisions in patent applications and reexamination proceedings, and renders decisions in interferences.
The procedural requirements for filing petitions for the IPR, PGR, TPCBM, and DER at the PTAB's Patent Trial and Appeal Board End to End (PTAB E2E) and the Patent Review Processing System (PRPS) can be summarized as follows:
The first step in the process for IPR, PGR, and TPCBM at the PTAB E2E, and DER at PRPS is the submission of a proper petition.
? Click on the "New Petitions" tab
? Select "Create New Petition"
? Select the relevant proceeding on the following screen, and
? Enter the information for the petition.
Once a petition is submitted via PTAB E2E /PRPS, a PTAB will review the petition for regulatory and statutory compliance.
Regulatory RequirementsThe regulatory requirements under 37 CFR 42.4, 6, such as page limits, font size, signature, and identification of lead and back-up counsel that must be met. If there are regulatory defects, the PTAB will enter a Notice of Filing Date Accorded to Petition and the individual who filed the petition will receive a notification by email giving an opportunity to correct the regulatory defects.
While the petition will be accorded the filing date of the original submission, the regulatory defect must be corrected within one week. If the defect is not corrected within one week, the petition will be forwarded to a PTAB judge who may initiate a conference call and/or issue an order to show cause, and terminated if the petitioner fails to respond to such an order.
Statutory RequirementsThestatutory requirements for all these proceedings are very similar, except for the DER.
IPR, PGR, and TPCBM: The top statutory requirements under 35 USC 135(a), 312(a), and 322(a) that must be met for IPR, PGR, and CBM petitions to be accorded a filing date:
? Appropriate fee successfully paid,
? Identification of the patent and the specific claim(s) being challenged,
? Identification of the real party in interest,
? Copies of the patents and printed publications relied upon in the petition, and
? Evidence (e.g., certificate of service) that a copy of the petition was provided to the patent owner.
Derivation Proceeding (DER): The top statutory requirements under 35 USC 135(a), 312(a), and 322(a) that must be met for the DER:
? Appropriate fee successfully paid,
? Identification of the petitioner's pending application,
? Identification of the respondent's earlier filed patent or application, and
? Evidence, (e.g., certificate of service) that a copy of the petition was provided to the respondent.
Compliant RequestIf any requirement is not met, the petition is incomplete, and petitioner will be notified as follows:
? The paralegal may call the individual who filed the petition and explain the deficiency or the defect.
? The paralegal will enter a Notice of Incomplete Petition and the individual who filed the petition will receive notification by email.
? The deficiency may be corrected within one month and the petition will be accorded the filing date of the new submission.
? If the deficiency is not corrected within one month, the petition will be dismissed. One exception is when the petitioner challenges more than 20 claims (15 beginning March 19, 2013) but does not pay the excess claims fees - the petitioner will receive notification and can file a request to have the Board review just the first 20 challenged claims (15 beginning March 19, 2013).
The IPR/PGR/TPCBM post-institution fee is for each claim in excess of 15 claims and the IPR/PGR/TPCBM request of each claim in excess of 20 claims[xvi].
For example, for a petition that is challenging 25 claims, the following fees are required for the submission:
? The IPR request fee (? 41.15(a)(1)): $9,000
? The IPR post-institution fee (? 41.15(a)(2)): $14,000
? Excess claims fee ($ 200 for each claim in excess of 20) for requesting 5 claims in excess of 20 (? 41.15(a)(3)): $1,000
? Post-institution excess claims fee ($ 400 for each claim in excess of 15) for requesting 10 claims in excess of 15 (? 41.15(a)(4)): $4,000
? Total: $28,000
The Office will notify the petitioner of any fee deficiencies. When the petitioner pays the required excess claims fees within the time period set forth in the notice, the Office will accord the date on which the fees are paid as the filing date.
If there are no statutory or regulatory errors with the petition, the paralegal will enter a Notice of Filing Date Accorded to Petition, the petitioner will receive notification by email, and the patent owner/respondent will receive a copy via regular mail.
Top 10 Common ErrorsThe following are the top 10 common errors noticed in the Petitions:
1. Improper usage of claim charts by including arguments, claim construction, and/or legal analysis in a claim chart;
2. Failure to set forth claim construction of disputed or important claim terms expressly in a claim construction section;
3. Exhibits do not match the documents listed in the Exhibit List;
4. Failure to identify related matters or provide a statement that there are no related matters;
5. Exhibits are not sequentially numbered in the 1001-1999 range;
6. Failure to identify lead or backup counsel as required by ?? 42.8 and 42.10;
7. Margins less than 1 inch as required by ? 42.06;
8. Failure to certify that the petitioner is not barred or estopped from requesting a review as required by ? 42.104(a) or ? 42.204(a);
9. The petition and supporting documents are served on the patent owner at an address that is not the correspondence address of record for the subject patent as required by ? 42.105(a) or ? 42.205(a); and
10. The petition and supporting documents are served on the patent owner later than the filing of the petition.
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Straus, The Impact Of The New World Order On Economic Development: The Role Of The Intellectual Property Rights System, 6 J. Marshall Rev. Intell. Prop. L. 1 (2006)
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Van Dyck, Importing Western Style, Exporting Tragedy: Changes in Indian Patent Law and Their Impact on AIDS Treatment in Africa, Northwestern Journal of Technology and Intellectual Property, Volume 6, Issue 1, Article 8 (2007): http://scholarlycommons.law.northwestern.edu/njtip/vol6/iss1/8
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[ii] 2016 Patent Litigation Study: Are we at an inflection point? https://www.pwc.com/us/en/forensic-services/publications/assets/2016-pwc-patent-litigation-study.pdf
[iii] Report of the Economic Survey 2015: http://files.ctctcdn.com/e79ee274201/b6ced6c3-d1ee-4ee7-9873-352dbe08d8fd.pdf
[iv] Hall et al., Post-Grant Reviews in the U.S. Patent System--Design Choices and Expected Impact, Berkeley Technology Law Journal, Vol. 19, No. 3, pp. 989-1015 (Summer 2004)
[v] Liu et al., The Impact of Patent Life on Total Welfare: A Policy Experiment, September, 2012
[vi] ePCT Third Party Observations: http://www.wipo.int/export/sites/www/pct/en/epct/pdf/epct_observations.pdf
Guide for applicants: PCT procedure before the EPO (Euro-PCT Guide) http://www.epo.org/applying/international/guide-for-applicants/html/e/ga_d_ii_5.html
Third Party Observations: http://www.wipo.int/pct/en/faqs/third_party_observations.html
[vii] Ex Parte Reexamination Filing Data - September 30, 2014 ht